Community Forex Questions
What is a fractional pip, and how does it differ from a regular pip?
A fractional pip, also known as a pipette, is a smaller unit of measurement used in forex trading that is one-tenth of a pip. While a pip represents the smallest price change that a currency pair can make, a fractional pip allows for even greater precision in price movements and can be particularly useful for traders using higher leverage.
For example, if the EUR/USD currency pair is trading at 1.12345 and moves up to 1.12355, this would represent a change of 1 pip. However, if the price moves up to 1.12352, this would represent a change of 7 fractional pips, or 0.7 pips.
Traders can use fractional pips to better manage their risk and optimize their position sizing, as they allow for more accurate calculations of potential profits and losses. However, not all brokers offer fractional pip pricing, and traders should be aware of the potential impact of spreads and other trading costs on their overall profitability.
For example, if the EUR/USD currency pair is trading at 1.12345 and moves up to 1.12355, this would represent a change of 1 pip. However, if the price moves up to 1.12352, this would represent a change of 7 fractional pips, or 0.7 pips.
Traders can use fractional pips to better manage their risk and optimize their position sizing, as they allow for more accurate calculations of potential profits and losses. However, not all brokers offer fractional pip pricing, and traders should be aware of the potential impact of spreads and other trading costs on their overall profitability.
Apr 10, 2023 09:07